Extended replacement cost coverage is a type of home insurance endorsement that offers additional insurance coverage to cover the increased cost of labor and materials when repairing or rebuilding your home after encountering a loss. It extends your dwelling coverage limits to cover additional expenses or increment to labor or material costs. This coverage can be added to your home insurance policy to provide an extra layer of financial protection.
On your home insurance policy, you may notice that dwelling coverage along with extended replacement costs is included in your policy. This coverage is also referred to as an additional replacement cost on your policy. With this coverage, you won’t have to worry about increases and additional bills for your home repair or rebuilding when a disaster occurs.
How Extended Replacement Cost Coverage Works
Extended Replacement Cost Coverage increases the entire coverage your home insurance offers when your home needs to be rebuilt or repaired after the occurrence of a disaster. It helps cover unforeseen costs due to the increase in the cost of labor and materials needed to fix your home. This coverage can be useful in several areas such as areas prone to natural disasters or construction cost increases. It ensures you have enough to cover your home repairs or rebuilding costs.
What Does Extended Replacement Cost Cover?
As previously stated, this insurance coverage covers the rebuilding and repair costs of a building after the occurrence of a covered incident. This additional coverage covers the cost of building materials, appliances, supplies, and permits. It also covers clean-ups, demolition, and labor costs. Your extended replacement cost you have depends on your home insurance policy. If the repair or rebuilding cost of your home is above your policy limit, you’d have to pay the rest out of pocket.
When to Consider Extended Replacement Cost Coverage
Extended Replacement Cost Coverage can help reduce risk by providing a financial buffer. You should consider this coverage if you live in areas prone to natural disasters or a home that is very costly to rebuild. This coverage can provide peace of mind for homeowners making sure they have enough funds to recover their home after a covered loss occurs or is experienced.
What is Included in Extended Replacement Cost Coverage
The extended replacement cost coverage adds several perils which include:
- Windstorm.
- Explosion (except from steam boilers)
- Hail.
- Civil commotion.
- Riot.
- Vehicle.
- Aircraft.
- Smoke.
This coverage covers you up to a specific limit on the cost to rebuild or repair your home after the occurrence of a covered incident. This amount depends on your home replacement I cost, this means your insurer will pay up to a certain amount for the replacement or repair of your home back to its original condition.
How Much Does It Cost to Add Extended Replacement Cost Coverage?
Including this coverage in your home insurance policy is generally affordable irrespective of the insurance company. This amount ranges from $20 to $150 a year. However, it’s important to consult a financial advisor, your insurance agent, or the insurance company for the actual amount.
Difference Between Extended Replacement Cost Coverage and Guaranteed Replacement Cost
While shopping for additional policy, you will either see an extended replacement cost or a guaranteed replacement cost. In this case, it is important to the difference between these two to help you in making your selection. Extended replacement cost covers up only a percentage of your dwelling policy while guaranteed replacement cost covers the rebuilding cost of our home after the occurrence of a covered incident irrespective of the cost. You may be required to pay out of pocket for extended replacement costs while the insurance company covers the entire payment for guaranteed replacement costs. All you will need to do is pay deductibles before your coverage begins.
Insurance Companies that offer Extended Replacement Cost Coverage
Availability of this coverage can vary based on region and state. However, most home insurance companies offer this coverage. These home insurance companies include:
- Chubby.
- Mercury.
- Country Financial.
- State farm.
From these companies, you can easily apply to purchase this additional coverage on your home insurance policy.
How to Determine Replacement Cost
The replacement cost is how much it would cost to replace an item. There are several online calculators you can use to determine how much your home repairs or rebuilding will cost. It will help you get the actual amount local contractors will charge for your home. It is however important to consider factors such as your home’s special features, labor cost, and material cost to aid proper determination.
